• There is unusual potential for a new shock, a new disruption due to Trump policies
• Geopolitical risks are elevated and attacks on the Fed’s independence is another key risk
• There is no easy way to manage this uncertainty
• A Fed that is not delivering predictability is not going to be good for anybody
• Unpredictability of US policy has dented dollar as the global safe asset
• USD/CAD exchange rate has not been a big preoccupation for us in recent years
• But if USD/CAD exchange rate changes a lot, that will affect our projections
• And we will have to take that into account
• We are feeling like there are more things that can go wrong around that forecast, it is more vulnerable

That’s an honest take as most major central banks have a lot to think about now, and not just about domestic issues. As Macklem mentioned, Trump making waves on the geopolitical scene and attacking the Fed’s independence are two things that cannot be overlooked. And that is not only for the respective impact on their own, but also on the likes of markets with precious metals surging and the dollar tumbling.

Besides the above, Macklem was also asked about whether risks are more tilted towards a rate cut or rate hike later in the year. However, he chose to play it safe in commenting that:

“In order to comment on the balance, you need to be able to assign probabilities to the risks. And to be honest, I think we’re finding that difficult.”